The Long Run Initiative has been established to help guide executives and policymakers understand the importance of history to their decision making. Why should business leaders and policymakers care about economic history? Can the past really help us make decisions in the present and for the future? A study of the economic past is useful for at least four reasons.
First, economic history helps us understand trajectories. In other words, it gives us an insight of where the economy has come from and where it is headed. Demographic changes have major effects on markets and public policy, but it is only by looking at the long run that we can understand the trajectory of demography. Without it, businesses have no idea of the size and shape of future demand for their products and services and governments cannot plan infrastructure and major capital projects. Trade wars, Brexit, and Trump can only be understood by looking at the trajectory of wealth inequality and globalisation over time.
Second, past economic events provides lessons for businesses and governments today, particularly when they are faced with volatility. During the global financial crisis in 2008, where did U.S. bankers and policymakers go for advice? They went to the Great Depression and all the great work that economic historians have done studying that cataclysmic event. However, in the case of the UK, there was no such playbook to hand. Indeed, the subsequent Parliamentary enquiry into the banking collapse in the UK recognised the importance of economic history not just in informing firefighting, but in fire prevention. It made the bold claim that the crisis may not have happened had bankers and policymakers been better educated about past crises and it recommended that the Bank of England become better acquainted with financial history.
Third, in an era of constant change and major disruption from the Big Data revolution and the rise of the robots, economic history provides contextual understanding and lessons for organisations in terms of how technological revolutions in the past have affected firms and workers. Technology is simply the replacement of human exertion, whether physical or cognitive, with machines. Over the past 250 years, there have been three occasions when technology has taken a major leap forward – the steam engine, electrification and computerisation. The introduction of each of these technologies had major ramifications for workers, firms, capital markets and governments. Each of these technologies has made redundant multitudes of workers, but they have also created new industries and new work opportunities.
Fourth, every organisation has its own history and it is incumbent upon present leaders to ‘indoctrinate’ employees regarding the story of their organisation. Where has it come from? How has it changed over time? The origins of the organisation inform and shape its mission. It can also be used to create a strong brand identity among all its stakeholders. Furthermore an organisation’s history can provide current executives with great leadership training material. How did the organisation deal with volatility and new technology in the past? How did it penetrate new markets in the past? How did it build customer and employee relationships?
The Rhyme and Meter of History
It is the Long Run Initiative’s contention that every organisation and every leader in an organisation needs to learn from the past. This is why top business schools like Harvard Business School have courses for their MBA students on the history of capitalism and business history. Mark Twain said that ‘history never repeats itself, but it does rhyme’. We set up the Long Run Initiative to help leaders understand the rhyme and the meter of history so that they are better placed to lead their organisation.